Company Blames ‘Lingering’ Economic Effects for Its Downturn

The filing on Sunday came after the board of directors was replaced following a proxy fight in which shareholders clamored for improved results at Alco, which operates 198 discount general merchandise stores in 23 states.

A company official declined to comment on Monday.

In court papers Sunday, Alco cited the effects of the “lingering economic slowdown” on its customers, many of whom are living on fixed or low incomes in rural areas.

While it has positioned its stores to avoid head-to-head competition with larger discount chains, Alco said it couldn’t escape the effects of economic distress in the U.S.

Founded in 1901 as a general-merchandising operation in Abilene, Kan., the company still services its stores from a major distribution center there. Executive offices are located in Coppell, Texas.

The bankruptcy filing puts about 3,000 jobs on the line, most of them in stores located in small communities and sparsely populated regions in states including Texas, Kansas and Colorado.

Alco has lined up a leading bidder, or “stalking-horse,” for the liquidation from a joint venture made up of Tiger Capital Group LLC, SB Capital Group LLC, and Great American Group WF LLC, according to the filing.

While it seeks bankruptcy-court approval to move ahead with the liquidation, Alco will also be pursuing a going-concern sale that would preserve operations at some or all of the stores. Potential buyers have been approached, Alco Chief Executive
Stanley B. Latacha
said in a court filing.

The company is operating under time pressure, as holiday-season liquidations generally bring the highest return, according to the Sunday filing in the U.S. Bankruptcy Court in Dallas.

As of July, Alco reported assets of about $222 million and debts of about $162 million. Most of the debt, about $104 million, is owed to
Wells Fargo
Bank N.A. and CIT Bank. Wells Fargo has offered bankruptcy financing to keep the stores healthy during the Chapter 11 proceeding, according to the court filing.

Additionally, Alco owes approximately $15.6 million in connection with capital leases, and pays about $2 million in monthly rent for stores throughout the central U.S.